How a former Fed vice chair would approach rate cuts

Summary

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Podcast Summary: The Indicator from Planet Money

Episode: How a Former Fed Vice Chair Would Approach Rate Cuts

Release Date: December 9, 2025
Hosts: Darian Woods, Stephen Massaha
Guest: Lael Brainard (Former Federal Reserve Vice Chair)

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Episode Overview

This episode navigates the turbulent waters of economic decision-making at a critical moment for the Federal Reserve. With official economic data delayed or canceled due to a recent government shutdown, the Fed faces its most consequential policy meeting of the year—choosing between keeping interest rates high to combat inflation or lowering them to support jobs. Former Fed Vice Chair Lael Brainard provides a rare insider’s look at the decision-making process and shares her approach to rate cuts under unprecedented uncertainty.

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Key Discussion Points & Insights

1. The Fed’s Dilemma Amid Data Shortages

• [01:20] Setting the Stage: Economic indicators crucial for the Fed's decisions have been delayed or canceled following a government shutdown.
• Jerome Powell’s Analogy: “If you’re driving in the fog, you slow down.”
  (Cited by Darian Woods at [01:34])
• The Fed’s meeting is likened to hitting a T-intersection:
  • One direction: "Hawk’s Highway" (higher rates to fight inflation)
  • The other: "Dove’s Drive" (lower rates to boost jobs)
    ([01:36])

2. Inside the Fed: Decision-Making Under Uncertainty

• [04:00] Lael Brainard shares the Fed’s rituals:
  • “Everybody gathers for coffee and donuts in the morning, and every person sits around this massive table and they each have their own time to make an observation about what they're seeing in the economy.” ([04:08])
• Fed members listen intently to each other, especially when official data is missing.
  ([04:24])

3. The Challenge of Delayed Data

• The shutdown means:
  • CPI (Consumer Price Index) for October canceled, November delayed
  • Latest jobs report outdated
• Brainard:
  • “So right now, with that data being so lagged at a moment where the economy is really pulled between these opposing forces… you really want up to date data.” ([04:59])
  • AI is changing investment and job prospects, complicating the picture.
• On missing critical data:
  • “It would be great to have the most recent data instead of 2 month old stale data to try to make those decisions.” ([05:43])

4. Making Decisions with Partial Information

• Even with current data, understanding economic turning points is intrinsically difficult.
  • “The data always feels a little bit like driving, looking into the rear view mirror because it is inherently backward looking… even with the most recent official statistics.” ([05:54])

5. Alternative Data Sources and Private Intelligence

• Without fresh government data, Brainard would:
  • Rely on frequent calls and meetings for real-time information
  • Seek private-sector data (e.g., ADP, Revelio Labs) and consumer sentiment surveys
    ([06:35], [06:54])
• “People are much more worried about job security than they were even a year ago.” ([07:08])

6. Brainard’s Policy Recommendation: The “Hawkish Cut”

• Pressed on how she’d vote if on the committee:
  • “I do think it’s important for the committee to bring inflation to 2%... On the other hand, we don’t want to see the economy go into a downward self reinforcing spiral… So I would probably on balance favor one more cut and then holding for a period of time, but with a very firm commitment to getting inflation to 2% over the next two years.” ([07:21])
• Darian calls this a “hawkish cut.” ([08:08])
• Brainard agrees: “That I think would be the right way to describe it.” ([08:10])

7. The Real Source of High Prices & the Limits of Rate Cuts

• Cutting rates focuses on jobs; inflation remains Americans' top concern
• Brainard:
  • “Affordability is the critical challenge for American households. Electricity’s more expensive, healthcare is becoming incredibly expensive, groceries have become more expensive. Then of course we know housing has been challenging for some time.” ([08:34])
  • Notes that many causes of high prices—such as housing shortages and tariffs—are outside the Fed’s control; require action from executive branch
    ([08:34]–[09:20])

8. High Prices vs. Rising Prices

• Stephen Massaha summarizes:
  • High prices aren’t always the same as rising prices; not all inflation is from monetary policy
  • For some, the pain is due to ending subsidies or tariffs rather than general inflation ([09:20])

9. Uncertainty Still Reigns

• Darian Woods:
  • “Would you say that now it’s like looking in the rearview mirror that is also foggy?” ([09:43])
• Brainard concludes:
  • “Well, either that or, you know, a very imprecise rear view mirror.” ([09:53])
• Whether the Fed makes the right decision will only become clear in hindsight. ([10:00])

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Notable Quotes & Memorable Moments

• Jerome Powell (via Darian Woods, [01:34]):
  “If you’re driving in the fog, you slow down.”
• Lael Brainard ([04:08]):
  “Everybody gathers for coffee and donuts in the morning and every person sits around this massive table and they each have their own time to make an observation about what they're seeing in the economy… People listen to each other even when they disagree.”
• Lael Brainard ([04:59]):
  “At a moment like this you really want up to date data.”
• Lael Brainard ([07:21]):
  “So I would probably on balance favor one more cut and then holding for a period of time, but with a very firm commitment to getting inflation to 2% over the next two years.”
• Lael Brainard ([08:34]):
  “Affordability is the critical challenge for American households… a more complicated set of solutions, I think are really important there, and they really sit with the White House, with the executive branch.”
• Lael Brainard ([09:53]):
  “Well, either that or, you know, a very imprecise rear view mirror.”

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Segment Timestamps

| Timestamp | Topic/Segment | |:-------------:|-----------------------------------------------------------------------------------------| | 01:18 | Show introduction and context: missing government data | | 01:20–02:17 | The Fed’s policy dilemma: "Hawk’s Highway" vs "Dove’s Drive" | | 04:00–04:34 | Lael Brainard describes Federal Reserve decision process | | 04:41–05:50 | Brainard on the challenges of missing critical government data | | 06:35–07:08 | Using private sector and alternative data sources | | 07:21–08:10 | Brainard’s recommendation: one more cut then hold, “hawkish cut” defined | | 08:34–09:20 | Brainard on the source of high prices and role of policy outside the Fed | | 09:43–09:53 | Metaphor of “a foggy and imprecise rear view mirror”—uncertainty at the turning point | | 10:00 | Episode wrap: true impact only clear in hindsight |

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Summary

This episode delivers a concise but fascinating window into how the Federal Reserve processes decisions when flying blind—lacking data, grappling with inflation and jobs, and facing new economic forces like AI. Lael Brainard’s perspective as a recent vice chair brings both candor and humility: she calls for a cautious, data-driven “hawkish cut” in rates, but acknowledges limits to what the Fed can do. With high prices front of mind for Americans and official data in short supply, the episode captures the uncertainty and complexity at the heart of modern economic policymaking.

Transcript

[A]

Hey, everyone, it's Darian woods here. Just quickly, before we start the show, I want to take a minute to talk about public media. This is what makes the Indicator and other NPR podcasts special. Public Media was founded to inform, to educate and to expand our perspective. But as of this fall, federal funding for public media, including NPR and local NPR stations, has been eliminated. Despite that, we remain committed to this work. Just this year, we've done episodes on why the trade war is missing, a referee on the stock market and the magic of diversification, on the surging cost of healthcare for pets. We go beyond the headlines to show you how the economy affects your life in 2026. With your help, we can do even more. Thank you. If you already go the extra mile as an NPR supporter. If not, you can join the PLUS community, get a bunch of perks like bonus episodes from across NPR's podcasts. Support Public media by signing up for NPR today. Just go to plus.NPR.org NPR.

This is the Indicator from Planet Money. I'm Darian Woods.

[B]

And I'm Stephen Massaha. Because of the recent government shutdown, a lot of economic indicators have been delayed or even canceled. That is troubling for decision makers. The chair of the Federal Reserve, Jerome Powell, recently put it like if you're.

[C]

Driving in the fog, you slow down.

[A]

And so if the central bank is a car slowly driving in the fog, well, this week it's hit a T intersection. The Federal Reserve is meeting today and tomorrow to decide what to do. On one side is the way of high interest rates. You might call this Hawke's Highway, a steeper incline of higher borrowing costs that will try to finally vanquish inflation. But the other direction is Doves Drive. That's a gentle downward slope promising lower interest rates and encouraging businesses to start hiring again.

[B]

So in one direction, stable prices or the other one, jobs. Which road should we take?

[D]

They're missing official statistics. And so for them, that's very difficult.

[B]

That is Lael Brainard. She was one of the drivers of this central bank car. She was on the big decision making committee at the Fed for eight years. Most recently, she was vice chair.

[A]

Today on the show, we get inside the committee that makes the big decision steering the economy and learn what this former decision maker would do today.

[E]

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[A]

Lael Brainard says the decision that the Fed's committee tomorrow will be fueled by two sources, caffeine and sugar.

[D]

Everybody gathers for coffee and donuts in the morning and every person sits around this massive table and they each have their own time to make an observation about what they're seeing in the economy, she says.

[B]

There does seem to be more disagreements between decision makers at the moment, but.

[D]

People listen to each other even when they disagree, they take each other's views very seriously.

[B]

At today's meeting, those observations might be taken even more seriously because of that lack of government data.

[A]

So because of the government shutdown, there's a whole host of indicators we're missing. The cpi, the Consumer Price Index, was cancelled for October and delayed for November. The latest jobs report only covers jobs from months ago. How would you describe this situation for decision makers?

[D]

So right now, with that data being so lagged at a moment where the economy is really pulled between these opposing forces, primarily because of tariffs and immigration restrictions, but also because of the AI boom that is starting to affect both job prospects and very much investment, because it's pulling investment away from manufacturing and some of the areas that are not immediately related to AI. So at a moment like this you really want up to date data, she says.

[B]

Those up to date indicators are needed to really know whether the risks of having higher inflation outweigh the risks of having higher unemployment.

[D]

It would be great to have the most recent data instead of 2 month old stale data to try to make those decisions.

[A]

Yeah, how bad is it to be missing this data at this critical time?

[D]

So it is certainly an impediment, but it's also true that when the economy's at turning points, it's just always hard to read the economy. The data always feels a little bit like driving, looking into the rear view mirror because it is inherently backward looking. So a moment like this, it would be hard to read the economy even with the most recent official statistics.

[A]

So thought experiment, you are on the committee this week and positive news is your binder is a little thinner, easier to lug in. The downside is that there's less data. So what would you be looking at instead?

[D]

So I would do a lot of calls and meetings in that intervening time. I used to find that incredibly important at turning points in the economy. I would certainly look at all the private sector and non governmental data sources that are up to date.

[B]

Lael's talking about private sources like ADP and Revellio Labs. Jobs numbers. These are businesses using job listings and payrolls to try and give their best estimates of how the labor market's doing. Also consumer sentiment surveys.

[D]

People are much more worried about job security than they were even a year ago.

[A]

So what's your take? If you were there in the decision making room, would you vote for raising interest rates, lowering them, keeping them the same?

[D]

So I think it's actually quite a difficult decision. I do think it's important for the committee to bring inflation to 2%, which is their target over the next two years. On the other hand, we don't want to see the economy go into a downward self reinforcing spiral where more people are laid off, they are no longer able to afford the same consumption and so the economy weakens and there are more layoffs. So I would probably on balance favor one more cut and then holding for a period of time, but with a very firm commitment to getting inflation to 2% over the next two years.

[A]

What some people call a hawkish cut.

[D]

That I think would be the right.

[A]

Way to describe it in the surveys I've seen. People are getting increasingly worried about jobs.

[E]

But.

[A]

But when you ask Americans what the number one issue facing the country is, inflation and prices seems to be number one. And so by cutting is that putting more weight onto the jobs and economy part of the equation and less so on the inflation and prices?

[D]

Sure, you're absolutely right. Affordability is the critical challenge for American households. Electricity's more expensive, healthcare is becoming incredibly expensive, groceries have become more expensive. Then of course we know housing has been challenging for some time. But a lot of those things that I just mentioned really are not simple price pressures that will be affected by cutting rates. They are long standing challenges that have to do with underlying supply dynamics like in the housing sector. And so a more complicated set of solutions, I think are really important there, and they really sit with the White House, with the executive branch.

[B]

In other words, Liu thinks that high prices aren't the same thing as rising prices. She says for people on ACA insurance, their high prices are stinging because the subsidies aren't being extended. She also says groceries could be made cheaper by removing the tariffs, and that's different than the high interest rates needed to curb generally rising prices throughout the economy.

[A]

You said that the data in a critical time is kind of like looking in the rear view mirror because it's past events. And would you say that now it's like looking in the rearview mirror that is also foggy?

[D]

Well, either that or, you know, a very imprecise rear view mirror.

[B]

Tomorrow, the Federal Reserve will announce its decision, whether it was the right one. We'll only know when we get to look back through that rear view mirror.

[A]

This episode was produced by Corey Bridges with engineering by Robert Rodriguez. It was fact checked by Kubecatz McKim. Kate Concannon edits the show and the indicator is a production of npr.

[C]

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[E]

This message comes from NPR sponsor Charles Schwab with its original podcast on investing. Each week, hosts Liz Ann Saunders, Schwab's chief investment strategist, and Cathy Jones, Schwab's chief fixed income strategist, along with their guests, analyze economic developments and bring context to conversations around stocks, fixed income, the economy and more. Download the latest episode and [e-mail] oninvesting or wherever you get your podcasts. This message comes from NPR sponsor Capella University. With Capella's flexpath Learning format, you can set your own deadlines and learn on your schedule. A different future is closer than you think with Capella University. Learn more at Capella. Eduardo.